View from City Road: Many obstacles for GEC to face

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The Independent Online
With Rover now gliding down the autobahn, it was only a matter of time before attention turned to the defence interests left in British Aerospace's locker.

Speculation about renewed merger talks with GEC may be premature. Nevertheless, both companies are interested in a deal. The big sticking point remains on what, or rather whose, terms.

Lord Weinstock has harboured designs on BAe for years. Indeed, had he been allowed to rescue the company in 1991, BAe would probably look rather similar to its shape today under its departing chairman, John Cahill.

GEC would have got rid of Rover and Ballast Nedam, as BAe has. GEC would have begun extricating the business from its property exposure, as BAe has. GEC would have addressed the problem areas of regional and turboprop aircraft, as BAe is doing.

But Lord Weinstock would still like to get his hands on BAe if only to crown GEC's domination of the defence sector. A combination of BAe's fighter aircraft and GEC's defence electronics would be fearsome indeed.

With a market capitalisation five times that of BAe, the whip hand would seem to rest with GEC. But there is a psychological point here, which is that BAe feels much bigger than that. BAe is also the prime contractor on more defence projects than GEC.

There is also the personal factor in the shape of Dick Evans, BAe's pugnacious chief executive who saw off BAe's last chairman but one and is about to see off the present incumbent. To succeed in his cherished mission, Lord Weinstock may have to fly under the Evans radar.